Officeworks bans “cash-back” offers – should your business abandon them too?

Cash back offers have come under fire, with leading retail analysts at odds over whether they add value to a customer’s purchase or are merely logistical burdens for both the consumer and the business.

The warnings come as office retailer Officeworks announced it has abandoned its cash back programs due to numerous complaints from customers, with many citing long delays in receiving their rewards.

David Oakley, Officeworks general manager of merchandise and marketing, says the company recognises the strategy behind cash back promotions but decided to abandon them altogether as of 20 July.

“We understand the strategy behind these sorts of promotions but our strategy is about delivering the lowest prices every day, guaranteed. Cash backs not only undermine that promise but they’re also confusing and too often seem to require consuming follow up time for customers. The technology retail landscape is confusing enough as it is for a lot of consumers; we’re just simplifying it for people where we can.”

Oakley says the company acted on customer feedback in making the decision, saying they can be “cumbersome” for customers.

“Officeworks prefers to deliver the lowest prices at point of purchase, without the need for complicated forms and follow up.”

Cash back programs have been attacked recently, after more than 190 complaints were registered with the Australian Competition and Consumer Commission about computer company Hewlett Packard’s program.

A large number of the complaints were related to long delays in receiving refunds, and for miscommunication between consumers and company staff. Hewlett Packard has said it will continue with the programs.

Additionally, Consumer Affairs Victoria said in its 2007-08 annual report that it received 50 complaints about cash back programs relating to products from computer company Acer, the highest out of any computer company.

As a result, retail analyst Rob Lake says businesses can avoid this controversy by abandoning cash back programs altogether in order to reduce logistical burdens, with sales rising as a result.

“It’s particularly common with electrical equipment, appliances and that sort of thing. It seems to be more common in that sector that any other.”

“But think about it, would you rather buy something for $20, or buy something for $25 and then post away to get $5 back? If you can make the purchase as simple as possible for the customer, then you will sell more. If you sell at a ticket price instead of with cash back offers, you will sell more. It reduces the logistical burden on the consumer and on your business.”

But Brian Walker, chief executive of retail consultancy group the Retail Doctor, says retailers should go ahead with cash back programs but only if they have the resources to make good on their promises.

“I can’t help think that this is a time where every customer transaction is always valuable, even more valuable. I don’t think other retailers should be abandoning cash back offers, but clearly they have to deliver on their promises.”

“They have to articulate it and deliver on it. Increasingly the market is focussing on relevance to the consumer and forming a relationship with them. The intent of a cash back offer is essentially to do that, and that is right for these times, but the challenge is to be clear in your communication, manage any implications of unclear messages and do what you say you’re going to do.”